Success Strategies for Mergers & Acquisitions

A Publication by Insite

MERGERS & ACQUISITIONS: Due Diligence & Post Deal Integration (Beyond Dollars & Cents)

CONTENTS

3

Abstract

3

What You’ll Learn

4

Do Your Due Diligence

5

The 4 Most Overlooked Areas of Due Diligence

6 7 9

6-Steps for Contact Center M&A Due Diligence

STEP 1: DISCOVERY

STEP 2: LISTEN TO THE DATA

11 12 12 13

STEP 3: BUILDING THE CAPABILITY MODEL

STEP 4: READOUT / DECISION

STEP 5: INTEGRATION PLANNING & SUPPORT

STEP 6: CONTINUED MEASUREMENT & IMPROVEMENT

14

Determine the Company’s True Value

A Publication by Insite

© 2022 Insite Managed Solutions, LLC. All Rights Reserved. Confidential and Proprietary Information of Insite Managed Solutions, LLC.

ABSTRACT When navigating the due diligence phase of a contact center merger or acquisition, verification of a target company's legal, regulatory, and associated fiscal realities is a top priority. But what about areas such as human capital, operational process, technology, and company culture? These categories should be expertly scrutinized as well to round out a complete picture to determine if the deal would be beneficial. Using a boots-on-the-ground approach and deep contact center expertise, assumptions should be proven or disproven and risks marginalized. Processes should be mapped, relationships understood, potential problems foreseen. New areas of opportunity should be unveiled. Thorough due diligence in these areas augments a clearer picture that greatly informs your decision to move forward. And beyond that, it maximizes integration planning and smooths implementation efforts, thereby boosting ROI significantly.

WHAT YOU WILL GET FROM THIS EBOOK: • How to actively research the 4 most overlooked areas to round out due diligence on a customer service center shortlisted for a merger or acquisition. • Learn how to minimize nasty surprises and increase return. • The 6-step process to M&A due diligence (and how to deploy it). • Understand how to leverage this information during integration to form a new contact center entity that surpasses the combined value of the two merged operations.

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DO YOUR DUE DILIGIENCE

Many times, the operational capability model of a target company is usually an afterthought after the audits and financials are out of the way. We have found that the most successful integrations occur when these operational capacities are evaluated as part of due diligence concurrent with (albeit separate from) the financial audits. This report details each operational department in terms of performance, skill levels, relationships, technology, and culture. It also scores capabilities based on industry benchmarks and highlights performance gaps and other weaknesses if they exist. It examines current state and ponders future state.

A capability model is like a doctor’s checkup with a prescription for good health moving forward. It allows you to take a department’s temperature and check for illnesses. If shortcomings are found, it acts as an immediate hitlist of necessary improvements to drive future success. If the company turns out to be strong or one that outperforms similar call centers, you walk away with the hard evidence to prove it.

A solid capability model lowers risk factors associated with acquiring or merging with a contact center because it reduces assumptions and incomplete knowledge about the target company. Discovered flaws become bargaining chips in negotiations. Effective reports boost ROI and pave the way for more accurate predictions about that return.

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THE 4 MOST OVERLOOKED AREAS OF DUE DILIGENCE

When building a robust capability model, here’s what to focus on within each of the four most overlooked areas. 1| HUMAN CAPITAL: Knowledge/Competency, Management, Key Personnel and Roles, Frontline Agents, Tenure, Attrition, Job Satisfaction Levels, Tribal Cliques/Relationships, Employee Motivation Levels, Glide Paths (past & future), Performance Levels, Non-Compete Contracts. 2| OPERATIONAL PROCESSES: Accounting, HR, Recruiting, Payroll, WFM, Quality, Training, Onboarding, Analytics, ORG Chart, Agents/Leadership, Sales, Marketing 3| TECHNOLOGY: IT Dept., Hardware, Tech Stack, Platform Compatibilities 4| COMPANY CULTURE: What's the culture? Will it mesh with your company? Does it need improving? Personalities? Will employees leave?

In addition, be on the lookout for the unspoken things that don't work or that people don't talk about. Have they been hacked? Are operational/improvement plans in play or are they just on paper? Legacy hardware/software? Process chokepoints? Unsafe or illegal practices? Environmental/building-related/tangible assets? Any hidden items that may benefit the buyer?

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6-STEPS FOR CONTACT CENTER M&A DUE DILIGENCE

Operational due diligence collects accurate and complete information about another company to paint a true picture of what’s happening. It’s very similar to the role of a private detective. But one of the biggest pitfalls in the process involves skimpy detective work. If you miss something major, the consequences may be devasting down the road. You must dive deeply into an operational process, a company population, existing technology, or prevailing culture to truly understand them. Your examination must proceed from many angles. How Is This Accomplished?

HERE IS A BASIC, 6-STEP GAME PLAN:

CONTINUED MEASUREMENT & IMPROVEMENT 6

DISCOVERY 1

INTEGRATION PLANNING & SUPPORT 5

ANALYSIS 2

BUILD THE CAPABILITY MODEL 3

READOUT / DECISION 4

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STEP 1: DISCOVERY In many cases, due diligence leans top-heavy on financials. Much of this work may be done in a vacuum by remote CPAs. While important, accounting figures don’t come close to telling the whole story. What’s needed to gain a full understanding is the addition of expert operational analysis via a boots-on-the-ground approach – professionals with call center backgrounds directly engaging with the target company’s staff, preferably onsite. Formal interviews are conducted. Roundtables are held. Surveys are sent out. It really boils down to talking to people and listening to people. It’s more than being close to the action. It’s about being in the action, side-by-side with those who are doing the work. Knowing their jobs and roles. Asking them questions. Observing their behaviors. Learning exactly how they complete their tasks. Reading between the lines. A qualified detective needs to be very experienced in contact centers and very skilled as an interviewer to do these things effectively. Time spent this way in each department and team sheds revealing light on operational realities. How employees are supposed to do their jobs versus how they actually do their jobs. How leadership rates. Choke points, relationships, technology/platforms. Figuring out the secrets of top performers. Understanding the gaps of bottom performers. Getting a real sense of their internal culture. Is it tight? Is it loose? Many subtle yet crucial details emerge when qualified contact center detectives spend time at street level. For instance, on paper it may appear that a particular workload has been spread out over several people. But what if the reality is that these tasks are being funneled through just one person, and that one person has their own way of doing things that’s opaque to the rest of the organization? Then they quit after the merger?

Many times, leadership at the top thinks everything is fine on the frontlines. But if you spend time with the people answering the phones, they will sometimes tell you a much different story.

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One time, we sat side-by-side with agents at a large contact center targeted for acquisition by our client. Leadership assumed they were all using the same technique. We observed poor performers, top performers, and all those in between. We were told that all the agents on this outbound sales team followed a specific script, yet simple observation validated what the performance metrics told us - adherence varied widely. As it turns out, all the agents did indeed use the script, but inconsistent to each other and the script’s intent. But the bottom performers followed that script verbatim and were unable to apply their coaching and training to certain moments. However, top performers used it to ensure regulatory compliance, but also as a guide in which they were able to apply their intuition and training to handle and successfully overcome customer objections, leading to higher conversion rates. With the script on their knee, they included every point. They just converted the points into their own words. After the acquisition, this became a best practice for the operation. Close contact with frontline agents and their management teams is the best way to understand a contact center and gain critical due diligence intel. By asking questions and watching the action, a skilled call center professional will discover how well the center’s knowledge management platform works, any potential technology incompatibilities, whether training is optimum, and the real problems people avoid discussing.

OUTSIDE THE BOX

Of course, data points and metrics will be gleaned from all the usual sources. But information may be collected from less obvious places as well.

In addition to normal work hours, information gathering can extend to smoke breaks, lunch, and dinner – even drinks after dinner. Many impromptu recon opportunities become available for those who put themselves in the right place at the right time. Look for these places. These chance meetings become rich sources of candid company snapshots. When woven together in the capability model report, these tidbits enhance raw data and metrics to create an honest, complete picture of the contact center’s current state. It's also worth noting that although agents and managers may not be forthcoming to leadership within their own company, they may be more prone to talk to an external team charged with operational improvement.

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STEP 2: LISTEN TO THE DATA Your team has squeezed as much information as it can out of the target company’s people, processes, technology, and culture. It’s organized and ready to go. What’s next? Analysis. It’s time to hear what all this information has to say. People constitute a large chunk of a call center’s value. Knowing who they are, their roles, their skill levels, and relationships with one another is a key aspect of due diligence in any merger or acquisition. A quality assessment of human capital will answer many questions. Who are the talented jewels of the company? Who is engaged and driving the organization? Who are the innovators? Who are the best candidates for future leadership? The answers to these questions and many more should be thought through and folded into the capability model report. When studying data covering operational processes, your team of analysts should be well versed in contact center analytics. This point is crucial. It’s the only way to dive into the data and thoroughly understand it. This step is part science and part art. The numbers need to be sifted through the proper methodology and matched and married to comments from what people had to say. And it all needs to happen within the framework of the proper industry-specific context. The results are then compared to leading industry benchmarks. Analysts must have access to a library of performance metrics from current best-in-class operations to do this. As this happens, personnel and process are scored against high-achieving trendsetters from your target company’s industry silo. This scorecard calls out strengths and weaknesses. A list of improvement opportunities and solutions takes form. This has high value later if the deal goes through.

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IT departments represent the largest source of undetected problems. Most times these snags occur because of incompatibilities in tech stacks. For instance, your company may use a Google-oriented tech stack, but the target company might leverage Microsoft. These two don’t mesh well. Other concerns may be found in KM platforms, LMS services, reporting dashboards, IVR, APIs, other software, etc. Analysts work hard to reference tech lists from both firms to identify which systems will likely integrate smoothly and which will not. Tech rarely merges seamlessly. Headaches, however, may be mitigated with foresight and planning. Your due diligence team can point out up-and-coming solutions and those currently used to solve these problems in leading contact centers. Predicting whether two corporate cultures are compatible can be a slippery slope. Assessing the culture of both parties should be a team effort. That’s because it’s partially dependent on the point of view of the ones doing the assessing. A more accurate appraisal will come from a more diverse base of viewpoints. Nonetheless, a company’s culture needs to be scrutinized as part of the process, especially if the new organization is integrated closely with the parent company. Otherwise, the results could be disastrous. Take the case of the Amazon/Whole Foods merger. The culture clash between these two has been widely reported. However, it didn’t appear on anyone’s radar. The friction between blending an impersonal, tight, efficiency-driven tech giant with a loose, values-oriented brick-and-mortar retail chain has ruffled customer feathers and driven out workforce at Whole Foods, the acquiree forced to align their culture with Amazon. The list goes on. AOL/Time Warner, Sprint/Nextel, Google/Nest.

Regardless of the likelihood of culture clash, a well thought through culture blending plan needs to be included in the integration plan should the deal move forward. Taking the best aspects of each culture and combining them into a new super culture is one approach to creating a new organization with a value higher than the sum of its net parts.

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STEP 3: BUILDING THE CAPABILITY MODEL The due diligence team compiles the findings once analysts have finished. This compendium may be published as a PowerPoint deck with supporting documents, spread sheets, and other collateral. Raw data such as KPIs, studies, metrics, and interview transcripts will be attached. The capability model also includes look back history, current state, look forward, industry benchmarks, and other information discussed above.

“Soft” information, like human capital and culture reports, will appear in summarized form with corresponding deep dive information attached.

Operational process maps are generated to expose the true workflows with all their triumphs and challenges. These maps are visual representations of call flows and other human processes. Process maps pinpoint root causes, both good and bad. Maps are an expedient way for stakeholders to observe how the call center actually gets the work completed, how customers interact, and where opportunities for improvement exist.

The capability model features a technology component that covers the current state situation, a report on potential compatibility issues, and a future-state forecast.

The model may contain other valuable information as well, including: • A cost/benefit analysis of an onsite workforce versus a remote workforce • A section on current and future training • Geographic factors such as cost of living and competitive wage/benefits reports.

It’s helpful to let your due diligence team know what types of details are important to you. It’s even more helpful when your team suggests items you haven’t thought of.

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STEP 4: READOUT / DECISION Once the capability model has been reviewed for accuracy and polished, it is presented to the stakeholders. The time required to prepare the model from the beginning of discovery to report readout averages around four weeks. Actual time depends on many variables.

Stakeholders must also review results of the legal, nancial, and other areas not included in this report. Once they do, they may circle back to probe and explore certain areas deeper.

A decision to back o or move forward on the deal will come at some point after every question has been answered.

STEP 5: INTEGRATION PLANNING & SUPPORT

The capability model remains extremely useful in the event the merger or acquisition proceeds. The ndings in the report evolve into the basis for an integration plan.

As the contract is being negotiated, thought should be given to integration so that your team can begin the process before the ink has dried. Use the capability model to identify which platforms, processes, and departments need to be changed or netuned to integrate seamlessly into your success plan. Key players, processes, and systems have already been identied. Your integration team will now use this information as they proceed with standup. KPI and other measurements during this phase, and after operations fully begin, will provide a clear view of whether or not goals are achieved. Sub-components of an integration plan should include project, communication, and change management plans. Each plan spells out the details of each step, the timeline, and identies the owners as well. These will help smooth and sooth problems such as revenue dips, culture collisions, job fears, low morale, lowered productivity, and other roadblocks. See our blog on Change Management for more details.

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STEP 6: CONTINUED MEASUREMENT & IMPROVEMENT

Measurement sets the stage for success. KPIs and other quantified metrics continue telling the performance story just as they did during due diligence. Keeping track of these numbers empowers your company with not only a clear picture of what’s happening, but also the data you need to scientifically identify the root causes of challenges as they appear. Analyzing these numbers puts you in the driver’s seat when deploying solutions to optimize call center operations. They indicate which levers to pull, especially if you have a list of industry-wide best practices standing by. The data will show you the effects of these improvements and you’ll know if further adjustments are needed.

Measurement extends past operations into other business aspects.

Periodic measurements may be taken in the realm of human capital. Employee engagement, attrition/retention, training, leveling, talent acquisition, company culture, PTO usage, and many other areas that touch staff experience may be turned into data points used in mapping past, present, and future state. Technology and changes in technology may be measured. Change management should roll out with pre-determined yardsticks at set times. Just as a CFO keeps their finger on the pulse of numbers circulating through the accounting department, all other departments can now listen to the enlightening hum of data points streaming out. Ask your due diligence team how. This information is the vehicle that takes you from where you are now to where you want to be.

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DETERMINE THE COMPANY’S TRUE VALUE

Due diligence is about determining the true value of a company. It’s also about planning for the future and avoiding nasty surprises.

If you plan on acquiring a contact center or merging with one, thoroughly examine the books. Take a hard look at legal, facilities, intellectual property, etc. But be just as rigorous getting to know the business side of their business, the engine that gets the job done day in and day out. Look under that hood and examine every single moving part. And if you can find one, bring along a qualified mechanic with a sharp pair of eyes. Also, be sure to consider the human aspects, the “soft” intel that’s not so easy to quantify. Read between the lines and really listen. Ask lots of questions. Get to know the people as well as the numbers they produce. This is the heart that pumps the organization’s lifeblood. True due diligence leverages a combination of science and the art of reading people.

GET INSITE. GET BETTER.

Have additional questions or need help with merger and acquisition due diligence and integration? Our team can help. As your contact center improvement partner, we implement solutions with you. We’ve been improving call centers since 2007 using a host of proprietary and customizable products and services. Most engagements feature our 3x ROI guarantee*, which self-funds your partnership with us and makes the decision a no-brainer. Contact us for a complimentary outside perspective of your current situation.

*Insite provides a risk-free approach by guaranteeing either increased revenue and/or reduced operational cost equal to or greater than our fee. If not, you get a full refund. Complete confidence in our proprietary process and data analysis, in combination with our quick hits, long-term initiatives, and rapid results allows us to offer this money-back guarantee. Since our inception in 2007, we have never failed to self-fund all engagements. Certain products and services are excluded. Conditions apply. Contact us for details.

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